600 B is latest downtown SD office building sale

In the third major downtown San Diego office building sale this year, a joint venture of Lincoln Property Co. and Angelo Gordon & Co. have completed their purchase of the 600 B St. office tower at that same address -- and at least one more big sale is on the way.

The 600 B St. is a 24-story, 359,218 square-foot office building occupying a full 60,000-square-foot block, a third of which is subject to a ground lease.

The building is 85 percent occupied.

The property, formerly known as the Great American Bank and San Diego Federal Savings building, was acquired from a Nomura Credit & Capital entity this month -- a year after the property went to foreclosure in December 2011.

Bay area-based Legacy Partners owed $74.06 million on the 600 B note at the time of foreclosure.

Built in 1974, the building underwent extensive renovations in 1996 and is Energy Star compliant.

“San Diego is a strategic growth market for our company, and the acquisition of 600 B Street is a tremendous opportunity to significantly increase our asset base in the region,” said Brig Black, Lincoln Southern California division senior vice president. “The lobbies and common areas of the building were recently renovated. Available office space offers floor-to-ceiling glass, ample ceiling heights and spectacular, unobstructed views of San Diego Bay and Balboa Park.”

The building could have some tenancy issues next year.

The city of San Diego has a lease at 600 B St. on 139,000 square feet that expires in May 2013, while the Embassy CES personal services firm is also scheduled to exit 14,584 square feet in March.

Late last month, the 553,715-square-foot Columbia Center office tower at 401 West A St. sold for $135 million to a unit of turnaround firm Emmes Master Services of New York City.

The property had previously sold for about $111 million in July 2003.

Unlike 600 B, which has managed to keep its tenants following the foreclosure, Columbia Center by The CoStar Group (Nasdaq: CSGP) and CBRE (NYSE: CBG) is still running about 30 percent vacant.

Major tenants at Columbia Center include the law firm of Higgs, Fletcher & Mack; the city of San Diego Retirement System; and the General Services Administration.

Kraig Kristofferson, a CBRE senior vice president who has worked in downtown San Diego for decades, said while there have been some nice improvements to Columbia Center, its design may be a concern to some.

“This property was originally going to have a Convention Center wrapping around the building. It doesn’t have a real definition of an entrance,” Kristofferson said.

Current U-T San Diego owner Douglas Manchester developed Columbia Center in 1982. The building was owned by the seller, Sentre Partners of San Diego.

In October, a joint venture of CruzanMonroe of San Diego and Cigna (NYSE: CI) closed escrow on the 305,255 DiamondView Tower office and retail property overlooking Petco Park. The price was $121 million.

Kristofferson said DiamondView’s office space, which he inhabits, is running at about 97 percent full.

Major office tenants include Cox Communications, Comerica Bank and Regus. Fit Athletic Club TakeLessons and Tilted Kilt are major tenants in the lower floor retail portions.

This purchase of DiamondView came after Dutch firm Wereldhave announced it would divest all of its commercial holdings in the United States.

The company has yet to sell First Allied Plaza at 655 Broadway. Kristofferson said that asset is expected to be part of a larger portfolio sale that could involve a major REIT.

“Wereldhave is reviewing several offers right now,” Kristofferson said.

First Allied Plaza is another of those buildings subject to a major ground lease.

Another building that was for sale earlier this year but has since been taken off the market is the 364,160-square-foot Emerald Plaza office building.

Currently owned by a unit of Rreef America, the office building is 82.6 percent occupied according to CoStar.

“There have been some nice improvements in that building too,” Kristofferson said, adding there are likely to be more major office building sales next year.

The dominant downtown office player that didn’t have any acquisitions is The Irvine Co., which owns seven buildings totaling about 2.5 million square feet -- including properties such as One America Plaza, Wells Fargo Plaza and Symphony Towers.